Assume That a Purchase Invoice for $1,000 Was Appropriately Recorded

question 137

Multiple Choice

Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2016,but the inventory was excluded in error during the ending inventory count.What impact will this have on fiscal 2017 financial reporting?

• A)Gross margin is understated by $1,000.
• B)Cost of sales is overstated by $1,000.
• C)Ending inventory is not affected by the prior year inventory counting error.
• D)Beginning inventory is overstated by $1,000.

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Definitions:

Service Costs

The expenses recognized in the period in which employees render services to obtain future benefits under a defined benefit plan.

Deferred

This refers to items or transactions that are postponed or delayed to a future date for accounting purposes.

Percentage-of-Completion Method

An accounting technique used to recognize revenue and expenses of long-term projects proportionally to the work completed to date.

Long-Term Contracts

Agreements that establish the terms for ongoing services or project work that lasts over an extended period, often involving incremental delivery and payment schedules.